Allium's analysis reveals large short positions on ZEC before a critical vulnerability was disclosed, leading to significant price drops.
Recent analysis by Allium has uncovered five substantial short positions on ZEC at Hyperliquid, amounting to over $72 million. These positions were established on May 25-26, just before a vulnerability was detected in the Orchard pool.
This critical bug was disclosed on May 29, with public awareness delayed until June 5. Following the announcement, ZEC's price fell dramatically from $685 to a low of approximately $250.
Allium reports a significant trading surge on Hyperliquid on May 26, with peak hourly turnover hitting $283 million, which is roughly 12-13 times the normal trading volume.
Adding to the market pressure, former BitMEX CEO Arthur Hayes revealed on July 4 that he had liquidated his entire ZEC position.
June 5 marked the highest trading activity for Zcash, with volumes surpassing $560 million as the price neared its lowest point.
The vulnerability, which had existed since the Orchard contract was launched in May 2022, permitted the creation of an unlimited supply of ZEC. The obscurity of Zcash transactions has left developers unable to confirm whether this flaw was exploited.
To address the issue, the blockchain team implemented both a soft fork and a hard fork. Allium cautioned that while the timing of the short positions raises questions, it does not conclusively indicate prior knowledge of the vulnerability. They noted that the analysis focuses on futures trading on Hyperliquid and does not encompass spot trading on platforms like Coinbase or Binance.
In response to these developments, the Zcash team has agreed on changes for the upcoming Ironwood upgrade, which aims to introduce a new secure pool and regulate the supply of ZEC.
